ST. LOUIS 


MUNICIPAL FINANCES 


CORRESPONDENCE BETWEEN 


CITY COMPTROLLER TAUSSIG 


AND THE 


CITY PLAN COMMISSION 


TRANSMITTED TO THE 


MUNICIPAL ASSEMBLY 


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17 W142. 


MUNICIPAL FINANCES 


LETTER OF TRANSMITTAL, JUNE 16, 1913. 


To the Honorable Municipal Assembly of the City of St. Louis— 
Gentlemen: 


Correspondence between the City Plan Commission and Mr. B. J. 
Taussig before he retired from the Comtrollership of St. Louis, 1s 
transmitted herewith. 


Mr. Taussig’s conclusions and recommendations have essential 
bearing upon the work of the Commission. They show: 


1. That the city to-day has the power to increase its bonded 
debt by $14,384,901 without exceeding the limit prescribed by the 
constitution of the state. 


2. That the bonded debt of St. Louis to-day is several millions of 
dollars lower than it was thirty-six years ago. 


3. That under the operation of the sinking fund as prescribed 
by the charter this debt is being paid off rapidly. 
Bonds Possible Without More Taxes. 


4, That within the coming ten years St. Louis can vote bonds to 
the amount of $15,000,000 for general public improvements without 
increasing the tax rate on interest account. 


5. That the policy of trying to pay for general improvements 
from the general revenue is unjust to citizens; that in the fiscal year 
1912-1913 the city appropriated from this general revenue $1,200,000 
for new work, improvements and additions; that it would have been 
simple justice to the citizens of the present and to those who come 
after, if the cost of these improvements had been met by the issue 
of bonds; that the growing practice of providing these outlays, which 
are additions to the capital of the city, from immediate revenue are 
wrong; that it is not fair to taxpayers of to-day to require them to 
assume these heavy burdens for outlays for property, the use of 
which will be enjoyed for a long period of years. 

Needed Permanent Improvements. 

6. That an expanding and improving city is like a growing bus. 
iness in requiring more capital, more investment; that if the city 
eould put $5,000,000 into new public buildings, new sewers, extension 


ST. LOUIS MUNICIPAL FINANCES 








_ of the fire service including automobile equipment, a tuberculosis hos- 

pital and other institutions for dependents, parks, parkways, play- 
grounds, bathhouses and comfort stations as rapidly as the money 
can be expended honestly and economically the city would see im- 
mediate and permanent gain in the value of private property and 
would get back through revenue good dividends on such investments. 


7. -That for other improvements in which one section realizes a 
larger proportion of benefit than accrues to the entire city the plan 
provided in the charter amendment recommended by the City Plan 
Commission should be appled; that under the plan the cost of this 
kind of improvements where nearby property is especially benefited 
would be divided between the city at large and the district in propor- 
tion of the benefits afforded. This principle of assessment districts is, 
in the Judgment of Mr. Taussig, vital to the movement for the im- 
provement of the city. 


Consideration of the statements and views of the former Comp- 
troller by the Assembly is respectfully requested. 


Respectfully, 


C. P. WALBRIDGE. 
Chairman. 
WALTER B. STEVENS, 
Secretary. 
June 16, 1913. 


ST. LOUIS MUNICIPAL FINANCES 











LETTER OF CITY PLAN COMMISSION, MARCH 15, 1913. 
Hon. B. J. Taussig, Comptroller, St. Louis—Dear Sir: 


The CITY PLAN COMMISSION respectfully submits the follow- 
ing inquiries: 


First: In what amount can the City of St. Louis at this time in- 
crease its bonded debt without exceeding the limit prescribed by the 
constitution of the state? 


Second: Basing your opinion upon your four years’ experience 
as Comptroller of the City of St. Louis do you deem it advisable for 
the city to increase its bonded debt? If so, from your knowledge of 
the needs of the city in what amount and for what purposes would 
the increase be advisable? 


Third: Is the present bonded debt of the city smaller in propor- 
tion to the assessed valuation of the city realty and personalty than 
it has been in previous years? If practicable the City Plan Coummis- 
sion would like to have a statement by years showing the relation of 
the eity dcbt for each year with respect to legal borr>wing hmit. 
Sinking Fund and Tax Rate. 


Fourth: Under the present bonded debt what is the amount, of 
annual reduction by operation of the sinking fund? 

Fifth: In what amount would the tax rate be increased if the 
bonded debt was increased in the amount you believe to be advisable? 


Sixth: What, in your judgment, are the public improvements im- 
mediately pressing which cannot be provided for out of the public 
revenue? 


The City Plan Commission will appreciate such data as you may 
be able to furnish in reply to these inquiries. We believe that such 
suggestions or recommendations as you may be willing to make in 
amplification of your answers to the above inquiries will carry much 
weight with the public. 


The members of the Commission feel that the four years’ study 
you have given and the opinions you have formed regarding these 
matter will be of great value to them in shaping their work. 


Very truly yours, 


(Signed) C. P. WALBRIDGE, Chairman. 
WALTER B. STEVENS, Secretary. 
March 15, 19138. 


Galt ues 


ST, LOUIS MUNICIPAL FINANCES 





LETTER OF COMPTROLLER TAUSSIG, APRIL 11, 1913. 
City Pian Commission of St. Louis—Gentlemen: 


Your letter of inquiry, dated March 15, 1913, has been received. 
It affords me satisfaction to give the information sought in as explicit 
and detailed form as possible. The financial conditions and problems 
of the city are not as well understood by our people as they should 
be. In view of the movement for many needed improvements, in 
view of the fact that there is widespread desire for changes in the 
charter, the publicity which the City Plan Commission may give to 
the information asked is timely. 


I will take up your questions in the order presented and answer 
them: 


First: The Commission asks, ‘‘In what amount can the City of 
St. Louis at this time increase its bonded debt without exceeding the 
limit prescribed by the Constitution of the State?’’ 


St. Louis’ Borrowing Margin. 
My auswer is that the City today has the power to increase its 


pnonded debt by $14,384,901 without exceeding the limit prescribed by 
the Constitution of the State. 


Second: You ask if, basing my opinion upon my four years’ ex- 
perience as Comptroller of the City I deem it advisable for the City 
to increase its bonded debt. 


I answer that I do think so WITH THE QUALIFICATION 
THAT THE FUNDS SO REALIZED SHALL BE EXPENDED HON. 
ESTLY AND ECONOMICALLY for the most necessary general im- 
provements of permanent character, as only through this method 
ean many of the needed public improvements be provided. 


As to the amount and the purposes for which the debt should be 
increased, I answer: 


To provide for such necessary general improvements the issue of 
$15,000,000 in bonds should be authorized, and be applied within the 
next ten years; this, in my opinion, is fully justified. I believe that 
amount of money can well be spent on necessary general improve- 
iments, the cost of which should not be provided out of the current 
revenues for maintenance of our city government and city institutions 
and which cannot be so provided if proper and just public services 
are to be rendered. 


ete ths 


ST. LOUIS MUNICIPAL FINANCES 








We need several millions of dollars for sewer construction if we 
are to maintain good sanitary conditions. We must complete the 
Muncipal Bridge and its approaches. The city may well invest a 
considerable sum now for such improvements as the City Plan Com- 
mission is working out and for which the general publie is to get 
the benefit in the years to come. The bonds should be issued and the 
betterments we need should be provided as rapidly as may be practic. 
able. By general improvements I mean those from which the publie 
at large derives the benefit, where one section of the city does not get 
an undue proportion of the benefit over another. 


The Vital Charter Amendment. 

For other improvements in which one section realizes a larger 
proportion of benefit we should have the charter amendment which 
the City Plan Commission has recommended and which would enable 
us to form assessment districts. Under that plan, to which the pro- 
posed amendment applies, the cost of this latter character of improve- 
ments would be divided between the city at large and the district in 
the proportion of benefits afforded. The principle of assessment dis- 
tricts is, in my judgment, vital to the movement for the improvement 
of the city. The bonds should be issued only in the order in which 
the needs present themselves as most important. The issue of bonds 
should not be considered as an increase of the burden of debt. The 
money thus expended in general permanent improvements should be 
viewed rather as an addition to capital. The expanding and in- 
proving city is like a growing business. It requires more eapital, 
more investment. The community that does not add to its invest- 
ment in betterments is as short-sighted as a business man who ignores 
opportunities, never enlarges his stock, never extends his plant. We 
saust have these permanent improvements, public buildings, institu- 
tions for dependents, sewers, parks, parkways, playgrounds, bath 
houses, comfort stations, modern equipment for the Fire Department 
etc., all of these things that tend to make our city more comfortable 
and more attractive, if the city is to expand as we hope. If we do not 
we shall not grow; in fact we shall not even keep our place among 
the cities. These improvements should be obtained by the issue of 
bonds. The people of St. Louis have only to look to the vicinity of 
parks and boulevards and playgrounds so far as we have established 
them to see the prompt influence they exert on the values of nearby 
property. 


Third: ‘‘Is the present bonded debt of the city smaller in pro- 


he fe hed 


ST. LOUIS pane FINANCES 


portion to the assessed valuation of the city realty and personalty 
than it has been in previous years?’’ 


A Striking Debt Comparison. 


I will answer that somewhat in detail because the comparison is 
striking and ought to be convincing with this generation of St: 
Louisans. 


In 1877, when the city separated from the county, it had a bond- 
ed debt of $23,067,000, with a floating debt of $747,302, or nearly 
$24,000,000. That was a larger debt thirty-five years ago than St. 
Louis has to-day. 


Viewing our debt by decades, also the assessed valuation of tax- 
able property and the growth of our revenue, we have some striking 
comparisons. In 1880 our bonded debt was $22,507,000. 


In April, 1912, our net bonded debt (taking into account the 
amounts in Sinking Funds) was $23,382,837, which amount was re- 
duced during the fiscal year just closed at $21,861,249. 


In 1880 our assessed valuation of taxable property was $161,322,- 
600. In 1912 it was $597,383,680. In other words our net debt is 
smaller at this time than it was in 1880, while our assessed valuation 
of taxable property is nearly four times what it was thirty-two years 
ago. Our total city revenue in 1880 was $5,113,231. In 1912 it was 
$17,394,444, over three times the amount of thirty-two years ago. 


The comparison for decades can be traced in the annexed table: 


1880 1890 190 
Assessed valuation of property... date 322,600 $248,667,085 $380,765,993 $597,383,680 
City revenue for all purposes... 113,231 7,006,614 10,071,735 17,394,444 


The Decreasing Debt. 


As requested in the letter of the Commission a statement by years 
is submitted ‘‘showing relation of the city debt for each year with 
vespect to the legal borrowing limit during a considerable period.’’ 


ST. LOUIS MUNICIPAL FINANCES 





STATEMENT SHOWING VALUATION, NET AMOUNT OF BONDS 
OUTSTANDING, THE AUTHORIZED LIMIT OF INDEBT- 
EDNESS AND THE FURTHER AMOUNT TO WHICH THE 
CITY COULD INCREASE ITS INDEBTEDNESS, 
FROM THE FISCAL YEARS 1901 TO 1913, AND 
BE WITHIN THE LEGAL LIMITATION, 





Net outstand-/ Authorized HSI Additional 


Assessed valu- 














ation ing debt al-| debtedness sum that may 
lowing for plus exemp- be issued and 
amount in tions be within le- 
PA best ett __! sinking funds BPRS ov) | gal limit 

IMA aee eee $380,765,593 
TOO1G ete. 394,722,242 $18 684,003 $19,038250 $ 394,277 
190 eeec 416,720,646 18,262,413 19,736,100 1,473,687 
land pathees 440,958,173 22,656,222 32,755,000 10,098,778 
$O0AR gra, 456,100,777 22,041,721 33,966,000 11,924,279 
1905662 0, 465,190,961 21,081,813 34,724,000 13,642,187 
Wega 493,377,665 20,157,192 34,278,500 14,121,208 
7Ghiy Peeagen 510,271,603 19,223,468 35,687,750 16,464,282 
CO figgara 524,302,020 . 19,418,348 36,532,550 17,114,202 
Ce ee 538,830,211 . 24,004,354 34,852,000 10,847,646 
LT eae nan 565,707,843 26,419,281 35,578,500 9 159,219 
TOLD es 573,888,210 24.961,636 36,922,350 11,960,714 
CID eae 597,383,680 23,382,837 35,671,400 12,288,563 


(GES Se Coed RSs 21,861,249 36,246,150 = 14,384,901 


St. Louis and Other Cities. 


St. Louis has.to-day a smaller total debt and a smaller per capita 
debt than any other of the eight largest cities of the United States. 
In 1890 the city had an outstanding debt of nearly $22,000,000. In 
1905 the debt had been reduced to $21,081,813, but by reason of the 
growth of the city in taxable wealth that debt was $18,642,282 below 
the legal borrowing limit. Between 1905 and 1910 the bonds for the 
free bridge and public buildings and other improvements to the 
amount of $11,200,000 were authorized and issued so that the net debt 
outstanding at the close of the fiscal year, 1910, was $26,419,281. The 
net debt thas been reduced, bringing the total in 1913 down to 
$21,861,249, Still the increase in the assessed valuations has sent up 
the legal limit of its indebtedness to $36,246,150. 


aby fees 


ST. LOUIS MUNICIPAL FINANCES 
Fourth: ‘‘Under the present bonded debt what is the amount 01 
e e j 
annual reduction by operation of the sinking fund?’’ 


Few citizens aside from those immediately connected with the 
handling of city finances realize how rapidly the sinking fund is tak- 
ing care of the existing bonded debt. Our debt is divided into two 
classes. We have the ‘‘general bonds’’ which were originally issued 
and renewed prior to 1890. The second class are the bonds issued for 
the World’s Fair and for public buildings and public improvements. 


Sinking Fund Reform. 


The possible operation of the public buildings and public im- 
provements sinking fund in wiping out the general bonds in eleven 
years, through investment of that fund in renewal issues of General 
Bonds, is illustrative of the uses to which unemployed sinking funds 
eould be put, and the benefits to be derived therefrom if authority 
was given to the Sinking Fund Commission, as I think it should be, to 
invest sinking fund money in any bonds issued by the city, as shown 
in the following statement prepared by Associate Comptroller, Mr. 
Gunn. 


By charter amendment in 1890 provision was made for the 
creation of a sinking fund to redeem bonds issued prior thereto. In 
all subsequent bond issues special sinking funds were provided. 


— {9g — 


ST. LOUIS MUNICIPAL FINANCES 





PUBLIC BUILDINGS AND PUBLIC IMPROVEMENT SINKING 
FUND—HOW ITS ACCRUALS MAY BE USED TO RETIRE 
OUTSTANDING GENERAL BONDS IN ELEVEN YEARS, 

IF AUTHORIZATION WAS GIVEN TO INVEST ITS 
SURPLUS IN RENEWAL ISSUES OF GENERAL 
BONDS AS THEY MATURE. 


(September, 1912). 








| | Balance in 
| ; | | public bldgs 
| | 'and public 
“eral | 4dmprove- 
| Reduction | aaine | ments sink- 
i | ing fund at 
of interest | fund would F ppalni, 
Amounts General payments | pe short at Laren et x 
: c | ; to be in 
Credited to | bonds ma- | added to | periods sa papee 
the fund at| turing at sinking | shown, the CeWeral 
dates shown | dates shown | fund amount Howantlas 
| | snow they are re- 
| | issued. 
POLS eke $ 604,043.51 $1,819,507.05 
YR DS fees 442,280.88  $1,155,000.00 $46,200.00 $ 108,675.61 2,479,507.05 
1914 tees 488,480.88 1,250,690.50 50,027.62 870,885.23 3,039,507.05 
LORD es 538,508.50 1,200,000.00 16,000.00 1,532,376.73 3,599,507.05 
9 LG mraees 554,508.50 945,000.00 16,537.50 1,922,868.23 4,159,507.60 
gH hy (yea BELO 46:0 OV yee eee 16,537.50 1,351,822.23 4,719,000.00 
EOL Shee Fiske DSi O ON fmt iesecet ses ceotuawe SUP reli ete ts Sea senathe 764,238.73 5,379,000.00 
POLO ee 587,583.50 2,578,000.00 45,077.50 2,754,655.23 5,939,000.00 
O20. es eee 632,661.00 275,000.00 49,260.00 2,396,994.23 6,499,000.00 
DS VAN 2 eis te 681,921.00 12,000.00 210.00 1,727,073.23 7,059,000.00 
LS 22 eran a GS20 PS COO Miter s Tere 210.00 1,044,942.23 7,619,000.00 
UG 22 eee GSA eS O OU y ee ctc cc eence ad Seni mm Pied eer aton gs 362,811.23 8,179,000.00 
VODA a GSU Sh OO aap seek Fee Tae RON) bee eee Oe eae x 319,319.77 8,739,000.00 
BOZD Oe: 682,131.00 BE OGOlO 0.0L OG eink eeeccteeoseecns x 1,450.77 9,299,000.00 
SO AG WAS crh eke peel BERL ALN UCL On Ne, Mittal bake e Oe Nee UNE th ea he Re Ree ee 9,859,000.00 
$8,417,141.27  $8,415,690.50 
x Surplus 








No Increased Tax Rate For More Bonds. 

This statement forecasting the growth of the sinking fund show 
that in eleven years we ean have entirely wiped out the ‘‘general 
bonds,’’ by which we mean those issued prior to 1890. The amount 
of the general bonds is $8,415,690. The operation of the sinking fund 
provision applicable to the Public Buildings and Public Improvement 
bonds will in that same period amount to $8,179,000. The normal 
increase in assessable valuation and the judicious handling of’ the 
sinking funds should contribute largely to provide added interest 
charges required by an increase of $15,000,000 of needed bonds if the 
issue is to be distributed over a period of ten years. 


‘Fifth: ‘‘In what amount would the tax rate for interest be in- 
creased if the bonded debt was increased in the amount you believe 


to be advisable.’’ 
walle ic 


ST. LOUIS MUNICIPAL FINANCES 








This is covered in answer to previous question. 


Sixth: ‘‘What, in your judgment, are the public improvements 
immediately pressing which cannot be provided for out of the public 
revenue ?’’ 


My answer to that inquiry is that while in practice the city has 
been making large capital outlays for permanent general improve- 
ments it cannot longer continue to do so and should not do so. 

Bonds For Permanent Improvements. 


The permanent improvements by which the city at large de- 
rives the benefit must be and should be provided by bond issues. The 
city is undertaking the performance of additional services for citizens. 
such as the better care of our dependents, the collection of ashes, new 
Service activities in sanitation and the promotion of health, the oper- 
ation of new play-grounds and the new public comfort stations. The 
city will be called upon unquestionably to extend its services. If we 
are going to have more permanent improvements resort must be had 
to bond issues or else the city’s current operations will be hampered 
through diversions of current revenue and expenditure for capital 
purposes. 


Permanent improvements of which St. Louis to-merrow is to 
realize as much benefit as—or probably more than St. Louis to-day, 
should be paid for by the issue of bonds, and by district assessment 
plan. As I have said, in practice we are trying to pay out of the 
revenue raised by annual taxation large sums for such imprevements. 
Take the fiscal year 1912-1913, we appropriated from our general 
revenue $1,200,000 on new works, improvements and additions. It 
would have been simple justice to us and to those who come after if 
the cost of these improvements had been met by the issue of bonds. 
This growing practice of providing these outlays, which are additions 
to the capital of the city, from immediate revenue is wrong. It is 
not fair to the tax-payers of to-day to require them to assume these 
heavy burdens or outlays for property, the use of which will be en- 
joyed through a long period of years. 


Long Time Bonds Recommended. 

Our bond issues have been limited to twenty years. That is a 
mistake. The life of the bond should bear approximately a relation 
to the life of the improvement for which it is issued. For example, 
if we issue bonds for an improvement which will last before renewal 

sees! ES fates 


ST. LOUIS MUNICIPAL FINANCES 


not longer than twenty years, then that issue should be limited to 
twenty years. But if we issue bonds for the purchase of other im- 
provements which will be utilized with probably growing benefit for 
generations to come, then the bonds should be for not less than forty 
years. These long time bonds would be considered more desirable, 
would command a better price and would be much easier taken care 
of through sinking fund and final redemption. The obligation would 
be lightened and contributed to by those getting benefit. 

I have repeatedly urged in my reports that municipal bonds be 
relieved from taxation. That recommendation I would repeat and 
emphasize. It is obvious that if such bonds are taxable they will be 
less valuable to the holder who lives within the state and consequently 
the city will be forced to sell those bonds for less. So to the extent 
that the city attempts to derive taxation from its own bonds it tends 
to injure its own credit. It is true most of the bonds escape taxation. 
The investment in them outside is encouraged; investment by the 
citizens of St. Louis is discouraged. The interest we pay on the bonds 
held by the people outside of St. Louis is spent elswhere. We neither 
get the taxes supposed to be imposed upon these bonds nor do we 
get the benefit at home of the interest we pay out. If our municipal 
bonds are exempt from taxation they will be more attractive to local 
investors; they will command higher prices and the interest we pay 
on them will be kept at home. 


Charter Changes Advisable. 


At the end of the fiscal year, 1913, we had in the sinking fund. 
through the operation of the charter and ordinance provisions, ap- 
proximately, $1,945,441. The existence of that fund is strong evi- 
dence that we need a charter amendment which shall permit the in- 
vestment of this cash in bonds. By such an amendment the city 
would be able to take advantage of opportunities to buy its bonds. 
The city would be saving the diflerence between two percent, which 
is approximately the amount on cash balances, and four per cent. 
which bonds would yield. The draft of charter which was submitted 
two years ago and defeated, included this provision for buying bonds. 
It provided authority ‘‘to purchase with the sinking fund as an in- 
vestment for it any bonds of the City of St. Leuis, State of Missouri 
or of the United States, preference being given to city bonds.’’ 

The proposed charter further provided that ‘‘whenever it be: 
romes necessary to pay maturing city bonds the Commission shall 
have power and authority to sell the bonds held as a sinking fund for 


al pes 


ST. LOUIS MUNICIPAL FINANCES 





such maturing bonds.’’ By having such authority the City, in time: 
of temporary stringency, would be able to take care of maturing 


bonds. 


Charter provisions such as I have quoted would make the City 
independent of temporary conditions in the money market, and en- 
able it to deal easily and profitably with renewal issues of city bonds. 


With these provisions allowing the Sinking Fund Commission to 
buy bonds we would not only save largely on interest but we would 
be in a position to take care of renewals whenever they were neces- 
sary without any serious difficulty which may arise from financial] 
conditions. 


Investment In Betterments. 


It is surprising that so few people appreciate what a city’s wise 
investment in betterments means from the financial point of view. 
Every proper investment as I have said is an addition to the capital 
and that increased capital returns quickly its dividend through the 
increase in valuations of private property benefited. If we should 
put $5,000,000 into new public buildings, new sewers, extension of 
the fire service including automobile equipment which would be more 
economical than the present apparatus, a tuberculosis hospital and 
such improvements as are contemplated by the City Plan Commission 
we would see immediate and permanent gains in the value of private 


property. We should get back through our revenue good dividends 


on such investments. 


A most notable recent advance in St. Louis property as the result 
of park acquisition and improvement is in the northwestern part of 
the city surrounding the old Fair Grounds. In 1908 the City pur- 
chased the Fair Grounds tract for $700,000, or $5,428.88 an acre, the 
tract embracing 128.94 acres. The gradual transformation of this 
ground into a park has been attended, according to real estate experts, 
by a very considerable advance of property on all sides of the park, 
the influence being felt a distance of several blocks. These increases in 
values have ranged from 25 to 50 per cent, in some instances the in- 
crease being even greater. 


Lalit i eee, 


e 


ST. LOUIS MUNICIPAL FINANCES 





The Fairground Object Lesson. 


This district affected by the establishment of Fairground Park 
was occupied previous to the change to some extent by moderate and 
even low-priced improvements, but there was much ground entirely 
vacant. Since the acquisition and since this transformation to park 
uses and improvement, much of the vacant ground nearby has been 
built over by a class of improvements considerably better than those 
that previously existed. The above is sustained by statements of real 
estate agents familiar with the locality and by our Department of 
Assessment. 


Upon one block fronting this new park there has been expended 
the past season $100,000 in improvements. In the opinion of our as- 
sessing department the increase of additional revenue to the city 
through the increase of values of real estate attributable to the estab. 
ment of this park will in a few years more than reimburse the city 
for that charge which it may have assumed in the purchase of this 
property. 

Respectfully, 


(Signed) B.J. TAUSSIG, 
Comptroller. 
April 11, 1913. 





CANON ANON 


—_———_—_—_ 


_ 30112 061909138 





